30/03/26, PostMarket REPORT

 

Benchmark indices  SENSEX and Nifty faced intense selling pressure for second straight session on March 30 after oil surged above $114 a barrel as an expanding Middle East war sapped risk appetite.

At 3:25 pm, the Sensex was down 1,488.48 points or 2.02% at 72,094.74, and the Nifty was down 446.15 points or 1.96% at 22,373.45. About 791 shares advanced, 3,341 shares declined, and 110 shares were unchanged.

The Nifty 50 and Sensex have lost about 10.5% each in March, putting them on track for their worst month since the COVID-19-led rout in March 2020, as elevated crude prices and record monthly foreign outflows worth $12.3 billion sapped sentiment.

The financial year 2026 ends on Monday. The indices are on course for their worst performance since FY2020, weighed down by India-Pakistan tensions, US trade uncertainty in the first half and the Iran war in the second amid relentless foreign outflows.

Rising crude prices

Brent crude rose 3% to $115.98 a barrel, bringing its gains for the month to 60% and topping the jump that followed Iraq's invasion of Kuwait in 1990. US crude climbed 3 to $102.52, making a monthly rise of 53%.

The US-Israeli war on Iran has entered its fifth week and spread further across the Middle East, with Yemen's Iran-aligned Houthis launching attacks on Israel over the weekend, stoking fears of disruptions to shipping lanes around the Arabian Peninsula and the Red Sea.

Meanwhile, Pakistan said on Sunday it was preparing to host "meaningful talks" in the coming days to end the war, even as Tehran warned it was ready to respond if Washington deployed troops on the ground.

"With the conflict in West Asia entering the fifth week, there are signs of escalation of the war with the Houthi's joining the conflict and the US sending additional troops to reinforce the attack. Brent crude has again shot up to $116. The Goldilocks macro scenario which India had before the war has almost disappeared thanks to the war. Instead of high GDP growth, low inflation, moderate fiscal and current account deficits and expectations of higher corporate earnings growth in FY27, now we face prospects of lower GDP growth, higher inflation, higher fiscal and current account deficits and lower earnings growth for FY27.

"The market has largely discounted these negatives as reflected in the decline in the Nifty trailing PE ratio to about 19.9 times. This is fair but not yet cheap valuations. But there are segments which are attractively valued like financials," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

"Assuming disruptions through Hormuz continue in April, we expect a more than 10% earnings hit for oil marketing companies, airlines, cement, tiles, paints and adhesives," said Mahesh Nandurkar, equity analyst at Jefferies.

FY2027 GDP could ease by 50 basis points, while India's corporate earnings may be cut by 2%-2.5% due the conflict, Nandurkar said.

Bank shares fall

Heavyweight financials, banks, private banks and PSU lenders fell 2%-2.5% on Monday, after the Reserve Bank of India tightened position limits on onshore exposure - a move bankers say could trigger disorderly unwinding of positions and potential losses.

The Reserve Bank of India late Friday directed banks to cap their net open rupee positions in the foreign exchange market at $100 million by the end of each business day, with compliance required latest by April 10.

The RBI's curbs on onshore position limits are expected to lead to dollar selling by banks in the domestic foreign exchange market amid unwinding of existing arbitrage positions.

These arbitrage trades were built by buying dollars onshore and selling them in the NDF market to exploit the spread between the two segments.

This spread had widened significantly amid a pickup in volatility and the fall in rupee on heightened risk aversion and oil-driven pressures linked to the Iran war.

The size of such positions is estimated at $25 billion to over $50 billion.

Selling by foreign investors continues

Foreign investors offloaded Rs 4,367 crore worth of Indian shares on Friday, per provisional data, highlighting continued caution and a risk-off sentiment among global investors.

"FPIs were net sellers on all trading days in March, so far, taking the total FPI selling through exchanges in March through 27th to a record Rs 1,18,093 crore, as per NSDL data. The weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee, fears of decline in remittances from the Gulf region and concerns surrounding the impact of high crude price on India's growth and corporate earnings contributed to the sustained selling by FPIs," said VK Vijayakumar.

Monthly Nifty F&O Expiry

With March 30 being monthly Nifty F&O Expiry, volatility is expected. VIX rose over 8% to 28.78. Markets are shut on March 31 for a holiday.

Weak rupee

The rupee weakened past the 95 per dollar mark for the first time on March 30 to 95.2 per dollar, down 0.3% on day. Rupee has depreciated 4.4% against USD dollar in the March quarter.

India's 10-year benchmark bond yield extended its rise in afternoon trades to cross the 7% handle for the first time in over 21 months, as rupee plunged to another record low, while overnight index swap rates underwent another wave of paying.

The 10-year 6.48% 2035 bond yield hit a high of 7.0121%, the highest for a 10-year paper since July 5, 2024, up from the previous session's close of 6.9419%.

Technical View

"In light of the recent sharp decline, continued weakness in both Nifty 50 and Bank Nifty, along with elevated volatility and cautious global cues, investors are advised to maintain a disciplined and selective approach. It would be prudent to focus on accumulating fundamentally strong stocks on meaningful declines rather than chasing any short-term bounce. Fresh long positions should ideally be considered only once the Nifty decisively breaks above and sustains the 24,000 mark, as such a move would indicate improving market sentiment and could pave the way for a more stable and sustained recovery," said Hitesh Tailor, Research Analyst, Choice Broking.

 With inputs from Reuters   Report by J. Jagannath of Network18